Archive for March, 2010

SE states’ debt burdens more favorable

The New York Times confirms another reason for the Southeast’s attractive growth potential and why increasing numbers of entrepreneurs are deciding to build their businesses in the region:  lower state debt burdens.  As the attached graph shows, the problem worsens dramatically when one considers many states’ 30statesGraphicA-popupunfunded pension liabilities.  (Click thumbnail for “top” 25 states for debt-to-GDP, “Overloaded with Debts Unseen”.)

Not only will such debt levels likely lead to growth-stalling tax increases on the businesses that operate in those states, but some of the states are also responding in “desperate ways” which could undermine investor confidence and result in a credit squeeze similar to that currently experienced by Greece (and perhaps someday by other PIGS.)

State Debt Woes Grow Too Big to Camouflage

By MARY WILLIAMS WALSH

California, New York and other states are showing many of the same signs of debt overload that recently took Greece to the brink — budgets that will not balance, accounting that masks debt, the use of derivatives to plug holes, and armies of retired public workers who are counting on benefits that are proving harder and harder to pay.

Complete NYTimes article here

Original American Enterprise Institute white paper here

UPDATE (3/31/10, 3:08PM):

Having had a chance to digest the original white paper, we are even more pleased than before to report that only one state – NE – has a lower debt-to-GDP % than FL (5th), GA (4th), TN (2nd), NC (3rd), TX and VA (tied for 6th).

State debt-to-GDP ratio

Source:  American Enterprise Institute

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Tampa private equity update: “great city for middle market deals.”

from the 3/19/10 Tampa Bay Business Journal

TBBJThe deal environment is more optimistic today with a focus on strategic acquisitions in health and life sciences and financial services. There’s about $750 billion in private equity capital and an estimated $1 trillion in corporate money waiting for investment opportunities, LaBranche said. Tight credit practices and uncertainty about health care and financial reform have kept investors from making big bets.

Once clarity comes to that process, I think investors are going to be looking hard to place that money and put it to work,” LaBranche said. “That’s what we do. We put wealth to work to create prosperity for other people.”

Adding value

Nationally, there are about 26,000 companies that employ 3.8 million people collectively with some level of private equity investment. At least 50 firms in the Tampa Bay area have attracted growth capital.

Ballast Point Ventures’ portfolio companies collectively employ more than 3,000 people across Florida, said Matthew Rice, VP. Investments include Lifestyle Family Fitness, a chain of health clubs based in St. Petersburg. Ballast Point initially invested in 2004 when there were 18 Lifestyle gyms; now there are 55 clubs…

TowerCloud LLC, a St. Petersburg provider of mobile backhaul services to wireless carriers, is a more recent investment but is expected to grow rapidly, Rice said…

Mission critical business-to-business services are faring well in the current environment, Oken said. B-to-b businesses that strip costs out of someone else’s economic model are a source of future growth, Ballast Point’s Rice said.

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Vintage Future

Predicting technological trends – let alone profit-making opportunities within those trends – is not for the weak at heart.  Here are a few brave & bold predictions from the past:

Even if you predict the trend, and the profitable opportunity within the trend, correctly – there’s still the matter of protecting the IP.

BPV sees its capital as a “growth accelerator” for established, rapidly growing businesses with strong management teams.  We prefer to focus our efforts on assessing competitive and execution risk rather than product or business model risk, and we want to see tangible evidence of the unique value offered by a company’s product or service.

UPDATE: 5/19/2010

Chef of the Future: “Yes – it can core a apple.”

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Empirical evidence: power corrupts?

Professor Michael Roberto blogs about new research that confirms the old saying about the corrupting influence of power.

The research suggests it’s not the power in and of itself, but the leader’s sense of entitlement to that power.  Those with more humility – for lack of a better term – about how high they’ve climbed seem to be harder judges of their own behavior than those who instead believe It’s Good To Be The King.  Professor Roberto:

Lord Acton once said, “Power corrupts. Absolute power corrupts absolutely.” This week, The Economist reports on some new research by psychologists Joris Lammers and Adam Galinsky. In an experiment they conducted, they examined people in four different states: 1) high power, believed to be achieved legitimately, 2) low power, believed to be legitimate, 3) high power, believed to be achieved illegitimately, 4) low power believed to be illegitimate.

These scholars found that high power individuals who believed that, “they were entitled to their power readily engaged in acts of moral hypocrisy.” On the other hand, low power individuals did not engage in moral hypocrisy. In fact, they tended to be harder on themselves than on others, when judging immoral behavior (such as stealing an abandoned bicycle). Lammers and Galinsky coined the term “hypercrisy” to describe that behavior. Now, here is the most interesting part: the high power individuals who believed that they had been ascribed that power, but were not really entitled to it, actually behaved just as the low power individuals did. What’s the conclusion? It appears that the feeling of entitlement among powerful individuals actually becomes the fundamental driver of misbehavior and immoral behavior. Of course, we all knew this intuitively, but the stark findings here provide some persuasive empirical evidence, while also showing us the interesting “harsher on themselves than others” effect for low power individuals.

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